2021/08/02 by Jin Hyuk Choi, Choi, Jin Hyuk, Kim Weston +1
Economics, Econometrics and Finance · #34H05 #91G80 #Complex Systems and Time Series Analysis #Economic theories and models #FOS: Economics and business #Financial Markets and Investment Strategies #Mathematical Finance (q-fin.MF)
paper · pdf · doi:10.48550/arxiv.2108.00973
openalex publication_date 2021/08/02 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
We prove the existence of an incomplete Radner equilibrium in a model with exponential investors and an endogenous noise tracker. We analyze a coupled system of ODEs and reduce it to a system of two coupled ODEs in order to establish equilibrium existence. As an application, we study the impact of the endogenous noise tracker on welfare by comparing to a model with an exogenous noise trader. We show that the aggregate welfare in the endogenous noise tracker model is bigger for a sufficiently large stock supply, but the welfare comparison depends in a non-trivial manner on the other model parameters.